Posted: Mon May 12, 2008 8:13 am Post subject: Re: Housing & Economic Collapse - In Progress - #2
The global slump of 2008-09 has begun as poison spreads
By Ambrose Evans-Pritchard
Last Updated: 11:29pm BST 11/05/2008
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The avalanche of bankruptcies has begun. Six US companies of substance have defaulted on bonds over the past fortnight, against 17 for the whole of last year.
(snip)
The California city of Vallejo (117,000 inhabitants) has just made history by opting for Chapter 9 bankruptcy, the result of tax erosion from a 26pc fall in local house prices. Half Moon Bay may be next.
"This is the tip of the iceberg: everybody is going to line up for Chapter 9 in California," said John Moorlach, Orange County board chief.
(snip)
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Crude ceased to be a friend of equities when it reached around $110 a barrel. At last week's close of $126, it became an outright threat. The Bush rescue package - $800 in rebate cheques per household - has been rendered null and void by the latest spike. The average US home is now spending over 8pc of income on energy or fuel.
Pritchard makes one comment that I have to vehemently disagree with:
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The oil spike will burn itself out.
This is a fallacy derived from perceiving oil in terms of barrels, rather than BTU. Oil prices will not recede until the world’s economy contracts at a rate equal to the decline rate in oil’s available energy. Graphs:Available Energy
High debt and a crushing credit market is taking a heavy toll on US corporations.
* Corp. BK - 33 - 2/23/08
* Corp. BK - 77 - 3/22/08
* Corp. BK - 109 - 4/30/08
* Corp. BK - 180 - 5/30/08 ????????
With the recent drastic decline rate in India’s industrial production growth, it can be expected that this will soon spread to the rest of the industrial world.
Speaking of bankruptcies, here is another one destined for the grave yard.
MBIA Posts Loss of $2.4 Billion as CDO Slump Deepens
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May 12 (Bloomberg) -- MBIA Inc., the bond insurer that lost 87 percent of its market value in the past year, posted a net loss of $2.4 billion as the slump in mortgage securities deepened.
The first-quarter net loss was $13.03 a share, compared with a profit of $198.6 million, or $1.46 a share, a year earlier, Armonk, New York-based MBIA said in a regulatory filing today. Unrealized losses from derivatives were $3.58 billion.
Citi (I think) estimated losses at $0.19 a couple of weeks ago. $13.03 per share is more than the company is worth. Can there be any doubt that the monolines are collapsing, and that when they do the rest of the bond market will follow. Long bond rates will skyrocket and mortgages along with them, adding fuel to the declining housing market conflagration!
Shipbuilding Torpedoed by Subprime Leads to Freight Cost Surge
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May 12 (Bloomberg) -- The biggest shipbuilding boom in history collided with the largest credit-market losses ever, undermining forecasts for a plunge in freight rates.
As much as $14 billion in ship orders is threatened by cancellations and delays, equal to 94 percent of annual revenue at Hyundai Heavy Industries Co., the largest shipbuilder. Tightening credit markets mean lenders demand a bigger deposit and shorter terms for financing, said Tobias Backer, the head of shipping for the Americas at Fortis, a merchant banker.
The credit crunch that took out US housing, is now taking out Japanese shipbuilders. Things are not going to improve for the US, and only Goldilocks fools, or corpo-shrills like Dennis Kneale, Don Luskin, Larry Krudlow, Brian Wesbury would say that they will!
dorlomin said:
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HSBC is huge in Asia so that helps insulate it at the moment from the UK US economic slowdown.
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In a sign of weaker global growth, both imports and exports fell sharply in March, driving the U.S. trade deficit down to $58.2 billion, the Commerce Department reported Friday. Nominal imports fell 2.9% to $206.7 billion, the largest decline in more than six years, despite record oil prices. Nominal exports dropped to $148.5 billion, the biggest drop in nearly three years, despite higher prices for U.S. farm products.
It appears that with the now emerging energy crisis, food shortages and possible famines, and declining production rates across Asia, that the perception that Asia will remain a stable and growing economic area, is a little exaggerated!
Stay tune for more updates on the upcoming Next Late Great Depression!
Joined: Jun 13, 2007 Posts: 3638 Location: Minniesotuh
Posted: Mon May 12, 2008 8:23 am Post subject: Re: Housing & Economic Collapse - In Progress - #2
From where did the "$800" figure in the article come? Typo by author? Wishful thinking? Unintentional leak about someone skimming off the top?
Shipping losses: This world is sooooo tied together! It is going to be quite a sight to see all business sliding down the clift, attempting, to no avail, to hang on by their fingernails. _________________ "RRrrruuuunnnn!!!" ~Apocalypto
"And at the same time, if you're reading this column right now with your $5 latte and your clean running water and functioning limbs and intact teeth, you can rest assured that there are roughly 3 billion people on the planet who subsist on about a dollar a month who see you just about exactly as you see Ambani. Which is to say: pampered and wealthy in the extreme.
And then you realize, of course, that money is no measure of anything that truly matters, really. It's merely another form of energy, a nice expression of ego, either all-consuming and destructive or capable of tremendous joy and good. Often, it's both.
And while dumping $2 billion on a single home is certainly a curious and perhaps slightly sad ethical choice — despite how it is, of course, the ultimate expression of capitalist ego — to me, tattooing a dollar sign anywhere on your life pretty much guarantees you a life lived on Macbethian terms: a tale told by an idiot, full of sound and fury and diamond-crusted toilet seats, signifying nothing."
Compliments of PBChat; Mark here gets it. Although, to be exact, money is not a form of energy but an human measure of energy/work exchange. _________________ "When fascism comes to America it will be wrapped in a flag and carrying a cross." --Sinclair Lewis
The new inflation epoch. Good but flawed in my opinion look at how the masses of dollars in the hands of states is helping fuel the comodities boom as armed with vast currency reserves of dollars they go out bidding for food and energy.
Joined: Jun 13, 2007 Posts: 3638 Location: Minniesotuh
Posted: Mon May 12, 2008 1:09 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
shortonoil wrote:
Ferretlover said:
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From where did the "$800" figure in the article come? Typo by author? Wishful thinking? Unintentional leak about someone skimming off the top?
That is the average rebate that the IRS expected to send out. Some people received up to $1,200.
Thanks, Short. Although I must admit, it seems silly to use the average of an amount going out. Those who only get $300 are going to feel cheated; those who got $1200 or more are going to feel superior. This weekend, I heard a commentator (PBS-no link-sorry) say that this first stimulus package was a bust, and that there was talk of a second package being needed. My jaw dropped! _________________ "RRrrruuuunnnn!!!" ~Apocalypto
Posted: Mon May 12, 2008 1:28 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
Ferretlover wrote:
This weekend, I heard a commentator (PBS-no link-sorry) say that this first stimulus package was a bust, and that there was talk of a second package being needed. My jaw dropped!
Why?
They are going to give you a lot of dollars for free... or at least they will give you back some dollars which have been taken away from you in the first place.
Joined: Jan 14, 2008 Posts: 321 Location: The Yukon
Posted: Mon May 12, 2008 2:41 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
shortonoil wrote:
Pritchard makes one comment that I have to vehemently disagree with:
Quote:
The oil spike will burn itself out.
This is a fallacy derived from perceiving oil in terms of barrels, rather than BTU. Oil prices will not recede until the world’s economy contracts at a rate equal to the decline rate in oil’s available energy.
With respect, this is misguided. A decline in global GDP is not required to reduce oil prices. There is no correlation. Global GDP is presently 3.7% and down only slightly albeit TSHTF for a few a weeks in the USA.
Oil prices will fall upon a 1-mbd decline in consumption from April levels; a similar rise in Supply; or a combination thereof.
With Congress & the Fed's skillful sidestep of a Recession, this Demand reduction is unlikely to be sourced in the USA. USA GDP will be over 1% in 2008 and near 2% in 2009. _________________ www.TrendLines.ca/scenarios.htm Home of the Real Peak Date ... set by geologists (not pundits)
Joined: May 02, 2005 Posts: 3422 Location: Oh really?
Posted: Mon May 12, 2008 3:53 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
FreddyH wrote:
shortonoil wrote:
Pritchard makes one comment that I have to vehemently disagree with:
Quote:
The oil spike will burn itself out.
This is a fallacy derived from perceiving oil in terms of barrels, rather than BTU. Oil prices will not recede until the world’s economy contracts at a rate equal to the decline rate in oil’s available energy.
With respect, this is misguided. A decline in global GDP is not required to reduce oil prices. There is no correlation. Global GDP is presently 3.7% and down only slightly albeit TSHTF for a few a weeks in the USA.
Oil prices will fall upon a 1-mbd decline in consumption from April levels; a similar rise in Supply; or a combination thereof.
With Congress & the Fed's skillful sidestep of a Recession, this Demand reduction is unlikely to be sourced in the USA. USA GDP will be over 1% in 2008 and near 2% in 2009.
With equal respect, you've left out a key point:
A great increase in the world's GDP will need to be steered towards energy production over the next ten years ($100 trillion has been tossed about) in order to keep burning the same annual BTU's.
This means we'll have to give up quite a few other energy expenditures along the way, since GDP activity is all energy streams.
The American public is currently getting squeezed by the differential between dollar and oil price change rate.
We're in a Frog Boil. Whether or not it's been engineered is irrelevant. _________________ "It's not demand; It's not supply.
It's coming up with credit to buy"
Joined: May 02, 2005 Posts: 3422 Location: Oh really?
Posted: Mon May 12, 2008 4:01 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
You might want to first challenge the 100 trillion number, which is fine.
Instead consider the needed annual investment to be only a single order of magnitude over current levels. Again, let's not forget that investment means energy, and it's not just the up-front investment that requires additional energy, t's the production and maintenance costs too!
Great!
So...who's gonna give up some consumption next?
It won't be those that own or work in energy, I can pretty much guarantee that. _________________ "It's not demand; It's not supply.
It's coming up with credit to buy"
NEW YORK (AP) -- JPMorgan Chase & Co.'s chief executive said Monday that while the crisis in the credit markets appears to be three-quarters over, he believes a U.S. recession is just beginning.
"Even if the capital markets crisis resolves, it does not mean that this country will not go into a bad recession," said CEO James Dimon, whose bank saw its first-quarter profit fall by half due to the recent collapse of the U.S. mortgage market. "The recession just started."
For less than the price of a decent used car, you can buy a home in Atlanta today.
Actually, real estate agents list a dozen choices for $10,000 or less.
Step up in price to $20,000 and your choices expand 10 fold.
The prices seem absurd but they are part of a real estate market suffering with rampant foreclosures, mortgage fraud, abandoned investor properties, a collapsing mortgage industry and other ills. The market is unlike anything seen in metro Atlanta in years and it has local tax assessors and appraisers as confused as anyone.
What is the value of a lot if no one can get a loan to buy it? How should you value a home that sits on the market for a year with no offers? When a neighborhood has several foreclosures, short sales and abandoned properties, do they set the market?
And then there's this little anecdotal gem (which probably involves fraud somewhere along the line):
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Wimberly said he'd recently sold a home in West End that tells the tale of what's happened in some neighborhoods. The home sold in March 2004 for $305,000 and then in August 2004 for $700,000. It tumbled to $122,900 in a sale last year. It sold recently for $51,000.
Those are the kind of numbers that have public officials scratching their heads.
"I had the toughest time trying to convince the bank the price was correct," Wimberly said. "They thought I was out of my mind."
The new inflation epoch. Good but flawed in my opinion look at how the masses of dollars in the hands of states is helping fuel the comodities boom as armed with vast currency reserves of dollars they go out bidding for food and energy.
This idea, Dorlomin, doesn't obviate the fact that commodities are becoming dearer for other reasons, while world wide, incomes are being destroyed through US dollar backed inflation.
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